Business

Solo-Entrepreneur? 5 things you should know about your taxes by Paul Koullick of @keepertax

Solo-Entrepreneur? 5 things you should know about your taxes

by Paul Koullick

Whether you’re earning money in a side hustle, or have your own small business, it comes with some serious tax burdens. Many first-time self-employed don’t realize this and wait until the end of the year only to discover that they owe thousands of dollars to the IRS and forgot to keep expense receipts. In this guide, we’ll cover the basics of what you need to know to avoid getting slammed by taxes as a freelancer.

#1 No, taxes aren’t being withheld from your paychecks

If you’ve previously only worked as an employee (W2), it may come as a shock that the money you earn on a 1099 contract or invoice does NOT have taxes already withheld. That means you’ll need to consciously remember to set money aside throughout the year to avoid needing to take a loan out at the end of the year.

#2 Keep track of work expenses throughout the year

Everything you buy and then use for work, whether it’s a new phone or gas for your car you drive for work errands, is at least partially deductible. Trying to remember expenses from nine months ago at tax time is really difficult, so it’s best to track these expenses throughout the year.

Sometimes, what counts as a tax write off isn’t entirely intuitive but you can use online guides like this one to learn more about what expenses you should be keeping track of during the year.

#3 If you work from home, you can likely claim the home office deduction

Even if you don’t have a separate room dedicated for work, you may be eligible to claim this valuable deduction. As long as you have a workstation located somewhere in your house or apartment where you tend to do work (rather than entertaining guests or watching TV), you get to write off of rent, utilities, wifi and so on.

#4 All of this matters even if you’re only self-employed part-time

Even if The standard deduction does not trade off with itemizing 1099 work expenses. It’s additive – meaning that you can claim both! That means even if you have a full-time W2 job and only do limited part-time 1099 contracting work, neglecting to claim work expense tax deductions is like donating money to the IRS!

#5 If you earn more than $1,000 per year, file quarterly (estimated) taxes

If you earn above the $1,000 threshold from self employment work, you’ll need to file quarterly taxes. Also known as estimated tax payments, this is the IRS’s way of simulating a salary tax withholding so that you aren’t caught off guard with a huge tax bill at the end of the year.

The good news? It takes just 15 minutes. You can use free online tools like Keeper’s quarterly tax calculator to quickly estimate how much you’ll need to pay, and file online. It takes just 15 minutes, and allows you to avoid a nasty penalty from the IRS.

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Paul is the founder and CEO of Keeper, an app that helps freelancers and 1099 contractors save money on taxes. In his free time, he loves jogging, chess, and spending time with his family in San Francisco.

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